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About Unlisted Property.......
Click on the image below to view Owen Lennie, Spokesperson for Light of Day Inc, explain the bank lending practices which endanger unlisted property funds and erode the savings of their investors.
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"Light of Day is an association of investors in the unlisted property sector who are concerned about the effect of bank lending practices in the value of their investment and their income"
"Light of Day is concerned that there is a lack of competition in the banking sector…we believe that banks have taken advantage of this position.” |
"The cost of funding for institutional property owners has started to thaw but it's a different story for those trying to finance second-class assets. Listed trusts with large market capitalisation have had some improvement in pricing, but other smaller groups have found the going tough." Australian Financial Review March 18th 2010
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"There are other leftover reminders of the near-recession. There is still about $20 billion in frozen mortgage and property funds that is unavailable, or only available under very restricted circumstances, to investors.....withdrawals from mortgage funds were restricted, or frozen, after the government introduced the bank deposite guarantee in October 2008." The Age February 21st 2010
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"The unlisted sector was caught with little room to manoeuvre during the downturn. Severe property devaluation pushed the unlisted funds' gearing levels remorselessly higher, well past 60 percent in many cases. In response, lenders imposed higher margins and shorter terms if they agreed to refinance debt. The net result was less cash available for distributions and redemptions by investors." Australian Financial Review March 16th 2010
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"The major banks plan to ration lending to the commercial property sector after slashing their exposures by more than $16 billion as valuations collapsed in the wake of the glabal financial crisis. NAB has reduced its overall commercial property-related loan book by $3.1 billion, or 4 percent, since March 2009. Westpac reduced its commercial property exposures by $10 billion in the 12 months to September last year and ANZ sliced $3.4 billion off commercial property exposure in the second half of 2009. CBA reduced its commercial lending book by $1.9 billion in the six months to December." Australian Financial Review March 25th 2010
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About the Banks........
"It's official. The big banks are ripping us off. In the past week, a holy trinity of the Reserve Bank, Treasury and the Prime Minister have come out with indisputable proof the major banks have lifted interest rates higher than neccessary." The Age March 19th 2010
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Treasury Secretary Ken Henry has voiced concerns over concentration in the banking sector and says that "the evidence suggests some diminution of competitive pressure over the past couple of years". Dr Henry has commented that the 0.25 percentage point increase in net interest margins since the financial crisis struck is a "concern to policymarkers"and warned that as funding costs fall due to a recovery in global credit markets "benefits should be passed on to customers, not shareholders". Australian Financial Review March 16th 2010
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"The RBA said the major banks were the worst offenders on excess pricing, with lending rates outpacing rises in funding costs by as much as 25 basis points - or a quarter of 1 percent - since the onset of the credit crisis. This had translated into billions of dollars of additional revenue." The Age March 12th 2010
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"Australian investors are critical of the job the competition regulator is doing in maintaining competition but they are hopeful it will take a stance against the proposed merger of National Australia Bank and AXA Asia Pacific." The Age March 11th 2010
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"While the global financial crisis saw banks around the world fall over, the crisis has proved to be a bonanza for Australia's main banks." Finance News March 8th 2010
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"We've got a banking sector that's restricting capital and that has been willing to give it to people to buy established homes and not to corporates willing to invest or create jobs and that's a dumb, lopsided thing." Australian Financial Review February 18th 2010
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"The Commonwealth Bank's swelling profit margins and ballooning market share are the best proof yet that the fianncial crisis has been very good for the most powerful institutions in the land and not so good for consumers. With competition all but gone the big four banks are in fine financial form and sitting on the lion's share of the home lending market, deposits, small business loans, corporate finance and credit cards." The Age February 11th 2009
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"With competition all but wiped out, a recurring theme from all the big banks will be falling bad debts, swelling profit margins and ballooning market share. This is the best proof yet that the financial crisis has been a boon for the big four banks." The Age February 9th 2010
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"If any major bank were to attribute some move above the Reserve Bank rate to a decision such as this they would incur the wrath, not just of the Australian people, but of the Australian Government." Treasurer Wayne Swan talks about the removal of the government bank guarantee in The Age February 8th 2010
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"There will be absolutely no justification, because of the withdrawal of the guarantee, for any bank to raise interest rates beyond any Reserve Bank movements - no justification whatsoever." Treasurer Wayne Swan quoted in the Australian Financial Review February 8th 2010
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"Bank wholesale funding costs had risen during the financial crisis, but the banks have passed on all of the increases through to borrowers, and then some, first clipping pieces off cash rate cuts, and then adding basis points of their own as the cash rate rose again. Net interest margins - the gap between bank borrowing and lending rates - are about a quarter of a percentage point better than they were before the financial crisis, a sign of expanding bank lending profitability." Ric Battellino, Deputy Governor Reserve Bank of Australia, quoted in The Age February 3rd 2010
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"Recently increases in lending rates have run ahead of the cost of funds. Banks' margins are now a little wider than at the start of the crisis, and therefore are adding to profits." Ric Battellino, Deputy Governor Reserve Bank of Australia, Remarks to the 22nd Australasian Finance and Banking Conference, December 16th 2009
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"The Big Four banks are highly profitable. Their cost of finance is higher as a result of the global financial crisis, but the margin they charge on their mortgages over the cash rate is growing. Even if their margins were not expanding, if any sector of the economy is more than capable of absorbing those higher costs, it's the big banks. But a lack of competition means they simply do not have to." The Age January 13th 2010
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"The big banks have gouged $7 billion from borrowers in the past two years by raising interest rates more than the Reserve Bank and refusing to pass on official cuts in full. The big four banks – which are still being protected by the Rudd Government from the fallout of the financial crisis – have repeatedly ignored pleas from Treasurer Wayne Swan to keep in step with the RBA rate movements. By refusing to pass on all interest rate reductions, inflating the Reserve Bank’s increases or adding hikes of their own, the banks have increased the gap between the cash rate and their key interest rates by as much as 1 per cent. Rate rises by the RBA are supposed to be a tool to slow the economy – not an excuse for banks to boost shareholder returns." Herald Sun December 6th 2009
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"We’re not the Jetstar of banking" Peter Hanlon, Group Executive for Retail and Business banking at Westpac, in response to criticism of Westpac's 45 basis point rate rise. Sydney Morning Herald December 7th 2009
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"Between 2000 and 2007, the net interest margin on the major banks’ Australian operations had narrowed by about 100 basis points). This was driven by competition, and made possible by reductions in banks’ operating costs, which allowed banks to continue operating profitably despite falling margins. Over the past year or so, however, margins have widened again, and they are now about 20 basis points above pre-crisis levels. This recent widening in the net interest margin has been largely due to wider margins on banks’ business lending. Margins on business loans are now substantially higher than they were immediately before the crisis." Ric Battellino, Deputy Governor Reserve Bank of Australia, December 2009
To read the full speech click here
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